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Longmont-based DigitalGlobe buys majority stake in top rival

New company's headquarters will remain in Longmont

By Tony KindelspireLongmont Times-Call

Posted:
07/23/2012 09:41:40 PM MDT

Updated:
07/24/2012 10:53:06 AM MDT

A Delta 2 rocket lifts off from Vandenberg Air Force Base, Calif., on Sept. 18, 2007, carrying the WorldView-1 satellite, built for DigitalGlobe. (Photo courtesy Carleton Bailie for The Boeing Company)

LONGMONT -- The clash of satellite imagery titans came to an end Monday when DigitalGlobe announced that it will acquire its biggest rival, GeoEye.

January 1992 -- WorldView Imaging Corp., DigitalGlobe's predecessor, is founded in Oakland, Calif.

October 1992 -- President George H.W. Bush signs into law the Land Remote Sensing Policy Act, which authorizes the U.S. Department of Commerce to permit the full commercialization of space images by privately owned and operated satellite companies.

January 1993 -- WorldView Imaging is granted the first license to build and operate a satellite system and sell the images it acquires commercially

January 1995 -- The commercial remote sensing division of Ball Aerospace merges with WorldView, creating EarthWatch Inc., which will be headquartered in Longmont.

December 1997 -- The EarlyBird 1, EarthWatch's first satellite, is launched but fails in orbit four days later. It is later declared a loss by the company.

November 2000 -- EarthWatch's QuickBird 1 is declared a total loss after it fails to reach orbit.

September 2001 -- EarthWatch changes its name to DigitalGlobe.

October 2001 -- DigitalGlobe successfully launches QuickBird 2.

DigitalGlobe's WorldView-2 sits at Vandenberg Air Force Base in California in preparation for its 2009 launch. WorldView-2 is the third satellite that Digital has in orbit. Like the WorldView-1, it was built by Ball Aerospace.
(Courtesy DigitalGlobe)

September 2003 -- DigitalGlobe announces a $500 million contract with the National Imagery and Mapping Agency to provide satellite images for government use.

October 2004 -- DigitalGlobe moves its headquarters to the Boulder County Business Center on Dry Creek Drive.

May 2009 -- DigitalGlobe goes public and starts being traded on the New York Stock Exchange under the ticker symbol DGI.

October 2009 -- The WorldView-2 satellite, also built by Ball, is successfully launched.

July 2012 -- DigitalGlobe acquires a majority stake in its biggest rival, Herndon, Va.-based GeoEye, for an estimated $453 million.

The combined company will be called DigitalGlobe and its headquarters will continue to be in Longmont, according to a company spokesman. The satellite company employs about 675 people, most of them in Longmont.

In what DigitalGlobe is calling a merger, 64 percent of the new company will be owned by DigitalGlobe, it will continue to trade on the New York Stock Exchange under the DGI symbol and the company's top two executives, president and CEO Jeffrey Tarr and Gen. Howell M. Estes III, chairman of the board of directors, will remain in their roles. The new 10-person board of directors will be made up of six people from DigitalGlobe and four from GeoEye.

DigitalGlobe took this satellite image of the capsized luxury cruise liner Costa Concordia on Tuesday, Jan. 17. The ship ran around in the Tuscan waters off Giglio, Italy, on Friday, Jan. 13.
(DigitalGlobe, Courtesy photo)

Matt O'Connell, president and CEO of GeoEye, will continue to work with the new company in an advisory role once the acquisition is completed.

The cash and stock deal is worth $900 million, according to DigitalGlobe. The sale price was $453 million, and the additional amount is GeoEye debt assumed as part of the deal, according to the spokesman.

Tarr was unavailable for comment Monday, but in a statement issued Monday, Walter Scott, executive vice president, chief technical officer and a founder of DigitalGlobe, said that the news is good both for his company and for Longmont.

"This combination is about growth and building an even better company for the future," Scott said in the statement. "In particular, we expect the combination will lead to an even more stable revenue base that will allow us to expand R&D and build better products, and we will need smart and dedicated people from both DigitalGlobe and GeoEye to drive that innovation. We are pleased that the combined company will continue to be headquartered in Colorado and are also committed to maintaining a significant presence in the areas where both companies currently operate."

Herndon, Va.-based GeoEye employs about 700 people total and more than 200 at its two facilities in Thornton, which serve as the primary operations center for the company's IKONOS satellite and the secondary operations center for the GeoEye-1 satellite.

DigitalGlobe, which was founded in 1997 as EarthWatch, has three satellites of its own circling the earth: QuickBird, WorldView-1 and WorldView-2.

The two companies each have one satellite under construction: GeoEye-2 and WorldView-3, the latter of which is scheduled for launch in 2014.

Under terms of Monday's agreement, which has been approved by the boards of both companies, shareholders of GeoEye will receive either $20.27 in cash, 1.425 shares of DigitalGlobe Inc. stock, or a combination of 1.137 shares of stock and $4.10 per share in cash for each of their GeoEye shares.

The deal is worth about $453 million based on GeoEye's approximately 22.4 million outstanding shares.

Bouncing bids back and forth

Monday's announcement comes about 21/2 months after DigitalGlobe rejected a takeover bid from its smaller rival.

In May, O'Connell sent Tarr a letter in which he suggested GeoEye pay $792 million in a 50-50 cash and stock deal to buy DigitalGlobe. DigitalGlobe's response was that the offer "substantially undervalues" DigitalGlobe's worth.

GeoEye's market capitalization at the time -- its share price times the number of outstanding shares -- was about $551 million, while DigitalGlobe's was about $766 million.

News of the GeoEye bid to buy DigitalGlobe broke on a Friday, May 4, and by Monday DigitalGlobe had announced a counteroffer to buy its Virginia-based rival -- the third such bid it had made in as many months.

Terms of those bids were apparently similar to what was announced on Monday, with DigitalGlobe owning more than 60 percent of the combined company.

The U.S. government is the biggest customer of both companies, primarily through the $7.3 billion contract that the National Geospatial-Intelligence Agency has through its EnhancedView program.

Rumors of budget cuts by Congress to U.S. intelligence programs, specifically EnhancedView, have been rampant for months, but last month DigitalGlobe was given assurances from the NGA that 100 percent of its funding -- $250 million -- would be left intact for this fiscal year. GeoEye, however, was not given the same assurance.

Monday's deal, which still needs approval from shareholders of the two companies and from regulators, is expected to be finalized by the first quarter of 2013.

John Cody, president and CEO of the Longmont Area Economic Council, said that following the news from May a lot of people had expected something to happen with the two companies, and this outcome is a good one for Longmont.

"I think it's all good. It makes perfect sense," Cody said Monday. "The only thing that surprised me a little bit about it is that sometimes I think the government likes to have more than one provider.

"Overall, as far as we are concerned, as far as Longmont's concerned, this is a positive thing."

DigitalGlobe's shares (NYSE: DGI) went up 82 cents Monday to $15.04 a share.

GeoEye's shareholders had a much more enthusiastic response to the deal; its stock (Nasdaq: GEOY) jumped $5.26 a share -- a nearly 35 percent increase -- to close at $20.43 a share.

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